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A Real-Time Montage of a Developing Global Deflation
Is the global economy headed for the German economic experience of 1928-1932?

By Bob Stokes
Fri, 01 Mar 2013 17:45:00 ET
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The Academy Awards broadcast often includes a film montage, or the memorable scenes which acknowledge the body of work from a person who has achieved Hollywood royalty. 

One definition of montage is the "process or technique of selecting, editing, and piecing together separate sections of film to form a continuous whole."
Film montages are usually retrospectives, but this article amounts to a real-time montage. The subject is a developing global deflation, with a narrative pieced together largely from current news clips. No applause will follow at the end. That said, this assemblage of news items will have served its purpose if it increases your awareness of the deflationary forces that are now at work in the global economy.
Euro Zone Unemployment Rises to Record
Unemployment in the 17-nation euro zone stood at 11.9 percent in January, up from 11.8 percent in December.
New York Times, March 1
[U.S.] Income Falls by Most in 20 Years
Fox Business News, March 1
Britain heads for new recession
The risk that Britain is entering its third recession in four years grew with figures showing that manufacturing shrank unexpectedly last month and mortgage approvals for home buyers dropped in January.
Reuters, March 1
Slack demand drops Chinese output to 5-month low
CNBC, March 1
Italy Jobless Rate Jumps to Record High of 11.7 Percent in January
Reuters, March 1
Default Fears Hit Argentina
Wall Street Journal, Feb. 28
Japan is in worse than a deflationary trap
The most troubling aspect of Japan’s malaise may be psychological. … Japan seems to have lost its self-confidence along with its drive for economic leadership.
Marketwatch, Nov. 1, 2012
Wal-Mart's Sales Problem—And America's
. . . does [the retailer's] bad February herald another recession?
Wall Street Journal, Feb. 26
Please keep in mind that these are but a few news items to suggest the early stages of a deflationary trend.
Nevertheless, many financial observers remain focused on elevated equity prices and the prospects of inflation.
Which enemy will it be: inflation or deflation? The German economic experience from 1928 to 1932 provides the best historical example of the psychological transformation that we expect to see in Britain and Europe over the coming years.
Global Market Perspective, January 2013




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